1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Learning from the Past:
WTO Litigation Experience and
the Design of PTAs
Manfred Elsig and Simon Wüthrich
World Trade Institute, University of Bern
November 11, 2016
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Our Central Claim
Experiences in WTO litigation
↓ Learning by domestic industries
PTA design:
1. Enforcement
2. Flexibility
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Existing Literature
▸
Learning and preferences for institutional design:
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Existing Literature
▸
Learning and preferences for institutional design:
1. Learning from prior interaction with a future treaty partner
(Copelovitch and Putnam, 2014)
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Existing Literature
▸
Learning and preferences for institutional design:
1. Learning from prior interaction with a future treaty partner
(Copelovitch and Putnam, 2014)
2. Learning from experiences in trade and investment disputes
(Elsig and Eckhardt, 2015, Manger and Peinhardt, 2014, Poletti and
De Bièvre, 2016, Rühl, 2014)
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
3 Assumptions
1. Trade policy = f(domestic industries)
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
3 Assumptions
1. Trade policy = f(domestic industries)
2. Mobilisation:
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
3 Assumptions
1. Trade policy = f(domestic industries)
2. Mobilisation:
2.1 Exporters: On-set and scope of PTA negotiations
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
3 Assumptions
1. Trade policy = f(domestic industries)
2. Mobilisation:
2.1 Exporters: On-set and scope of PTA negotiations
2.2 Import-competing industries: PTA enforcement and flexibility
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
3 Assumptions
1. Trade policy = f(domestic industries)
2. Mobilisation:
2.1 Exporters: On-set and scope of PTA negotiations
2.2 Import-competing industries: PTA enforcement and flexibility
3. Industry mobilisation: Fire-alarm mechanism
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Causal Mechanism
Opposition in a WTO dispute
↓
Updating of the belief about prob(challenge) under PTA:
prob2 (challenge) > prob1 (challenge)
↓
Increase in mobilisation
↓
Government preference for PTA design:
1. Enforcement ↘
2. Flexibility ↗
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Hypotheses
H1
The more countries were opposed in WTO disputes prior to
signing a PTA, the weaker the enforcement mechanism found
in their trade agreement.
H2
The more countries were opposed in WTO disputes prior to
signing a PTA, the higher the degree of flexibility found in
their trade agreement.
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Operationalisation
DVs
Enforcement:
Legal dispute settlement (0-1)
Retaliation mechanism (0-5)
Flexibility:
Flexibility strings (0-6)
Source: Design of Trade Agreements (DESTA)
database (Dür et al., 2014)
n = 347 PTAs post-1990
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Operationalisation
EV
Prior interaction in WTO litigation:
WTO disputes opposed
(count; log-transformed)
Sources: Datasets on WTO members’ positioning in disputes (Bechtel and Sattler, 2015, Kucik
and Pelc, 2015), supplemented with own coding
n = 415 disputes
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Operationalisation
EV
Prior interaction in WTO litigation:
A
B
C
defendant complainant third pro-complainant
AB, AC: opposition
BC: alignment
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Baseline Results
Variables
Legal Dispute Settlement
Retaliation mechanism
Flexibility strings
WTO disputes opposed
-0.383
(0.383)
-0.440**
(0.199)
-0.350**
(0.174)
Political and economic controls
Regional FE
Temporal FE
Observations
Model
Included
Included
Included
347
Probit
Included
Included
Included
347
Ordered probit
Included
Included
Included
347
Ordered probit
Standard errors in parentheses. Constant (cuts) omitted from the output table.
Levels of statistical significance set conventionally: *** p<0.01, ** p<0.05, * p<0.01
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Predicted Probabilites
Strength of the PTA retaliation mechanism
Prior interaction
in WTO disputes
0
(weakest)
No interaction
Opposition (1 case)
0.301
0.414
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Recap
▸
Past experiences spill over to PTA design negotiations.
▸
Opposition in WTO disputes leads to weak retaliation
mechanisms and few if any flexibility strings.
▸
Learning from the past takes place, but it is confined to
litigation experience at the WTO as a proximate and salient
forum for interaction.
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
1. Main Claim
2. Existing Literature
3. The Argument
4. Empirical Analysis
5. Conclusion
Many thanks for your attention!
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
References I
Bechtel, M. M. and Sattler, T. (2015). What Is Litigation in the World Trade
Organization Worth? International Organization, 69(02):375–403.
Copelovitch, M. S. and Putnam, T. L. (2014). Design in Context: Existing
International Agreements and New Cooperation. International Organization,
68(02):471–493.
Dür, A., Baccini, L., and Elsig, M. (2014). The Design of International Trade
Agreements: Introducing a New Dataset. The Review of International
Organizations, 9(3):353–375.
Elsig, M. and Eckhardt, J. (2015). The Creation of the Multilateral Trade
Court: Design and Experiential Learning. World Trade Review,
14(S1):13–32.
Kucik, J. and Pelc, K. J. (2015). Measuring the Cost of Privacy: A Look at the
Distributional Effects of Private Bargaining. British Journal of Political
Science, 46(4):1–29.
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
References II
Manger, M. S. and Peinhardt, C. (2014). Learning and Diffusion in
International Investment Agreements. PEIO Conference Paper, Princeton
University.
Poletti, A. and De Bièvre, D. (2016). Judicial Politics and International
Cooperation: From Disputes to Deal-Making at the World Trade
Organization. ECPR Press, Colchester (United Kingdom).
Rühl, J. (2014). Design by Diffusion: Dispute Settlement Mechanisms in
Preferential Trade Agreements. Dissertation Manuscript, Graduate Institute
of International Studies.
Sinclair, S. (2013). Saving the Green Economy: Ontario’s Green Energy Act
and the WTO. Canadian Centre for Policy Alternatives.
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
Operationalisation
CVs
Further variables for prior interaction:
Alignment in WTO disputes
WTO coalitions
BITs and BIT disputes
UN-notified bilateral treaties
Political and economic controls
Regime type and democratisation
Veto players
WTO membership and mission size
GDP, GDP per capita and GDP asymmetry
Trade flows
European Union and United States dummy
Member states, depth and escape flexibility
Temporal and regional FE
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
Extended Baseline Results
Variables
Legal Dispute Settlement
Retaliation mechanism
Flexibility strings
WTO disputes opposed
-0.383
(0.383)
-0.440**
(0.199)
-0.350**
(0.174)
WTO disputes aligned
0.414
(0.290)
0.158
(0.186)
0.179
(0.163)
WTO coalitions
0.0764
(0.315)
0.234
(0.209)
0.0661
(0.185)
BIT
-0.197
(0.212)
-0.145
(0.162)
-0.235
(0.143)
BIT dispute
-0.667
(0.791)
-0.0150
(0.477)
-0.233
(0.449)
UNTS bilateral
0.0323
(0.134)
-0.140
(0.0986)
0.172**
(0.0874)
Political and economic controls
Included
Included
Included
Regional FE
Included
Included
Included
Temporal FE
Included
Included
Included
Observations
347
347
347
Model
Probit
Ordered probit
Ordered probit
Standard errors in parentheses. Constant (cuts) omitted from the output table.
Levels of statistical significance set conventionally: *** p<0.01, ** p<0.05, * p<0.01
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
Dilution effect
al cooper
ner IT ation
e
B s
G
W TO
PTA design
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
Illustration
2009
Launch of the CETA negotiations
2011
European Union challenges Canada for procurement rules in energy
(Ontario Power Authority; WTO DS246)
2013
Canadian energy sector calls upon the
government to “fully safeguard its existing
policy flexibility over procurement and renewable energy” (Sinclair, 2013)
2016
CETA Annex 19-4 with flexibility for procurement by Ontario Power Generation
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
Robustness Checks
▸
Ordered logit estimation
▸
Maximimum number of disputes
▸
Intra-industry trade and retaliation
▸
Power asymmetries (OECD, GDP-weighted templates)
▸
General template provisions
▸
Binary litigation variables
▸
Moving time windows (20 to 3 years)
▸
General litigation experience
▸
Two-stage estimation
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
Two-Stage Estimation
Retaliation mechanism
Second stage
Retaliation mechanism
First stage
Flexibility strings
Second stage
Flexibility strings
First stage
WTO disputes opposed
-0.482**
(0.207)
-0.0114
(0.0656)
-0.311*
(0.172)
-0.0131
(0.0650)
WTO disputes aligned
0.314
(0.211)
0.386***
(0.0662)
0.198
(0.157)
0.385***
(0.0660)
Included
Included
Included
347
Ordered probit
Included
Included
Included
75’456
Probit
Included
Included
Included
347
Ordered probit
Included
Included
Included
75’456
Probit
Variables
Political and economic controls
Regional FE
Temporal FE
Observations
Model
Standard errors in parentheses. Constant (cuts) omitted from the output table.
Levels of statistical significance set conventionally: *** p<0.01, ** p<0.05, * p<0.01
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham
References
General Litigation Experience
Variables
Retaliation mechanism
Flexibility strings
WTO disputes opposed
-0.496**
(0.194)
-0.321*
(0.168)
WTO disputes defendant activity
-0.494**
(0.245)
-0.576***
(0.211)
Included
Included
Included
347
Ordered probit
Included
Included
Included
347
Ordered probit
Political and economic controls
Regional FE
Temporal FE
Observations
Model
Standard errors in parentheses. Constant (cuts) omitted from the output table.
Levels of statistical significance set conventionally: *** p<0.01, ** p<0.05, * p<0.01
Elsig & Wüthrich (2016): Learning from the Past
IPES 2016, Durham